A provocative, unsponsored assessment of current and future legal, regulatory, marketplace, and cultural issues affecting telecommunications and information policy presented by Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law, Penn State University

Wednesday, July 9, 2008

While attending the International Telecommunications Society’s 17th bi-annual conference I attended yet another network neutrality session. Economists predominated at this conference and their collective read on network neutrality emphasizes the need for ISPs to “extract value” from content providers primarily by converting zero cost peering with ISPs into specific payments from individual content sources.

I have no problem with offers of non-neutral, “better than best efforts” routing options to content providers who voluntarily opt in, particularly if the offer is made transparently and anyone can opt in. What troubles me is the impact of opt-in on content providers that opt out.

In the satellite industry, an opt-in/opt-out dichotomy exists: content providers seeking better than best efforts can secure what is known as “protected” transponder capacity—a commitment by the satellite operator to prioritize service and to replace transmission capacity should it become defective. Unprotected transponder lessees get no expedited access to replacement capacity, but they suffer no additional punishments for refusing to pay the premium rate.

I am not confident ISPs will follow the satellite capacity model as opposed to applying the Enron model where traders quickly learned that they could make more money creating bottlenecks and spot capacity shortages where no lack of grid distribution, or electricity capacity existed. If the smart folks at Enron could learn how to manipulate the flow of electrons what prevents smart ISP operators from similarly manipulating the flow of packets similarly requiring “urgent” real time delivery?

Put another way will ISPs retaliate against opt-out content providers with the creation of artificial congestion, by dropping packets, inserting traffic resend commands and partitioning bandwidth with an eye toward forcing migration to premium service even as the division guarantees inferior service that breaches contractual QOS commitments?

The opt in/opt out dichotomy does not necessary cleave between deep pocketed content providers who can afford to pay for premium service and providers lacking such financial resources. One paper at the ITS conference suggested that unknown content providers might have the most to gain from premium access. What presents a problem, not addressed by the economists at ITS or elsewhere is the impact of practices that exceed necessary price and QOS discrimination.

The FCC has imposed a number of behavioral regulations on cable television ventures based on their ability and incentive to engage in unreasonable discrimination by favoring corporate affiliates vis a vis competitors. In the cable context discrimination applies to the availability and price of “must have/must see” video content. Arguably ISPs have a similar ability to create a bottleneck or boycott.

About Me

Rob Frieden serves as Pioneers Chair and Professor of Telecommunications and Law at Penn State University.He also provides legal, management and market forecasting consultancy services and has written four books, most recently Winning the Silicon Sweepstakes: Can the United States Compete in Global Telecommunications published by Yale University Press. Rob has written over one hundred articles in law reviews and telecommunications policy journals and has provided commentary in a variety of trade periodicals. He updates a major communications treatise: All About Cable and Broadband (Law Journal Press).

Rob has held senior policy making positions in international telecommunications at the United States Federal Communications Commission and the National Telecommunications and Information Administration.In the private sector, he practiced law in Washington, D.C., and served as Assistant General Counsel at PTAT System, Inc. where he handled corporate, transactional and regulatory issues for the nation's first private undersea fiber optic cable company. Professor Frieden holds a B.A., with distinction, from the University of Pennsylvania (1977) and a J.D. from the University of Virginia (1980).